French Political Turmoil Ignites Rush for Havens: Markets Wrap

　　(Bloomberg) -- Investors sought out haven assets as concerns over political turmoil in France deepened, with European stocks heading for their worst week since October and US equity futures weakening.

　　The Stoxx 600 dropped 1.2% to extend losses since Monday to 2.6%. Frances CAC 40 index erased its gains for the year, with banking shares such as BNP Paribas SA and Societe Generale SA among the biggest losers.

　　The S&P 500 and Nasdaq 100 are set to open lower after notching up record highs every day this week. A gauge of the dollar rose against major global currencies, while Treasury yields declined three basis points.

　　“Its a risk-off tone with concerns over France driving the markets,” said Mohit Kumar, chief economist for Europe at Jefferies International. “Particularly going into the weekend, investors would be taking some positions off the table.”

　　Markets are increasingly anxious after French President Emmanuel Macron announced a snap legislative election following his party‘s drubbing in the European Parliament elections. Investors fear a win for Marine Le Pen’s far-right National Rally party, which leads polls by a wide margin, will usher in looser fiscal policies.

　　The uncertainty has sent the premium France pays on its bonds relative to Germany soaring this week, on pace for the most on record, while the yield on two-year debt for Germany — the safest European sovereign — is set for the biggest drop since May 2023.

　　“It‘s hard to ignore the parallels between our current situation and the time of the sovereign debt crisis, as there’s that familiar focus on election results, sovereign bond spreads and debt sustainability,” said Jim Reid, an analyst at Deutsche Bank AG. Thats “coupled with no obvious sign about where things are headed next.”

　　The week‘s turmoil has wiped out all June’s gains for the European benchmark, with investors warning that the volatility may continue until the French vote is concluded in July.

　　“Elections in France tend to be more volatile for equity markets than other developed markets,” Beata Manthey, head of European equity strategy at Citigroup Inc., told Bloomberg Television. “This volatility could continue for a bit longer.”

　　Among US premarket movers, Adobe Inc. shares are set for their biggest gain in about four years after projecting strong future sales for its creative products. Meanwhile, Tesla Inc. investors voted for Elon Musk‘s compensation package and moving the company’s state of incorporation to Texas.

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　　In Asia, MSCI‘s Asia Pacific index slipped as losses in Australian and Chinese stocks offset gains in Japan’s benchmark.

　　The Bank of Japan triggered renewed weakness in the yen after making investors wait until its July meeting for details on its paring of bond buying, a move that was also seen as a delay in the normalization in policy. Still, Governor Kazuo Ueda pushed back against the view that a rate hike was no longer possible next month.

　　A “weak yen might weight down the flows from overseas investors in the summer,” said Hiromi Ishihara, head of equity investment at Amundi Japan. “That said, we still believe that BOJ is set to move a further hike this year.”

　　Key events this week:

• 　　Chicago Fed President Austan Goolsbee speaks, Friday

• 　　US University of Michigan consumer sentiment, Friday

　　Some of the main moves in markets:

　　Stocks

• 　　S&P 500 futures fell 0.6% as of 7:08 a.m. New York time

• 　　Nasdaq 100 futures fell 0.3%

• 　　Futures on the Dow Jones Industrial Average fell 0.8%

• 　　The Stoxx Europe 600 fell 1.2%

• 　　The MSCI World Index fell 0.3%

　　Currencies

• 　　The Bloomberg Dollar Spot Index rose 0.3%

• 　　The euro fell 0.4% to $1.0695

• 　　The British pound fell 0.5% to $1.2702

• 　　The Japanese yen was little changed at 157.05 per dollar

　　Cryptocurrencies

• 　　Bitcoin rose 0.1% to $66,750.07

• 　　Ether rose 0.8% to $3,504.94

　　Bonds

• 　　The yield on 10-year Treasuries declined three basis points to 4.21%

• 　　Germanys 10-year yield declined 10 basis points to 2.37%

• 　　Britains 10-year yield declined seven basis points to 4.06%

　　Commodities

• 　　West Texas Intermediate crude was little changed

• 　　Spot gold rose 1% to $2,327.86 an ounce